Deadline Looms for Feedback on Definition of 'Small'

June 22, 2004 -- Small businesses have until July 2 to log their opinions about a proposal from the Small Business Administration that seeks to alter the definition of the word "small" when it comes to eligibility for certain types of funding.

The proposal would introduce new standards and guidelines for the term "small business," a definition that impacts which businesses are eligible for funding and special contracts from government agencies. With these new standards, the the SBA argues, it will be easier for more businesses to apply to SBA programs. The new standards would also reduce costs of administering SBA programs, according to the agency.

Hanging in the balance for tens of thousands of U.S. businesses is their eligibility for receiving financial assistance the SBA loans small businesses each year.

One goal of the proposal is to simplify the current structure. The proposal issued March 19 recommends that the current thirty-seven size standards, which depend heavily on a business's annual receipts, be reduced to only ten size standards, largely based on number of employees. In the proposal, the SBA cites evidence that "number of employees" is the best indicator of "business size" because it is less volatile than annual receipts with respect to short-term economic conditions.

Should the proposal be approved, it would impact nearly 70,000 businesses. Although 35,200 businesses would gain "small business" eligibility, 34,100 stand to lose it. The SBA has not released estimates of annual funding that businesses losing small business eligibility would have to forfeit.